I agree with Daniel. Commissions are approximately 3% per side. However, with short sales and bank owned properties, they could be close to 0. Don't forget that the 3% is a very rough number. If a relocation is involved, they usually take about 45% from the top. Then, a full service broker will take their portion, sometimes as much as 50%. Then-the agent has to pay federal taxes and both sides of social security.Then, there are expenses and time. Unless you are "after" some of your agen'ts commission, you shouldn't worry, unless you want to pay them more if they are under compensated.

Yes, great question, thumbs up, but Jack, I have a question for you. Why is it so important to know what commission your agent is being paid? Sometimes, the really good deals come with a higher commission, because the seller is motivated.

Seems odd there are 97 answers and only 4 thumbs up to Jack for the question. C'mon people, give Jack a thumbs up for asking a question of obvious interest. The conversation has been stellar.

I enjoyed it, so thumbs up Jack!

1. Your agent should have explained his or her agency relationship with you before you started looking for homes and in Colorado and most states that would include a buyer agency agreement.
2. If he or she didn't, you might want to find a different agent who will explain how they will be working with you.
3. Ask them specifically what they are paid on the transaction..
4. Your the ultimate decision maker on the home and if you feel he or she is steering you, confront them.

I have just finished reading some of the other answers to this question and am really surprised to see how many of the answers indicate that the individual agents will receive 100% of the offered compensation on each side of the transaction.. Than would certainly be the exception rather than the rule although it seems that most consumers seem to believe that the commission checks written at closing are made out to the Agents when the great majority of the commissions are received by the Companies and the Agents are paid just a portion of that amount.

Your Buyer Agency agreement should contain the amount of compensation that the Agency will receive upon the closing of your transaction, but if you feel it necessary to know how much your Buyer Agent is going to receive, then you need to ask the agent. It is common practice for every real estate company to have a compensation agreement with each of their agents and that spells out the amount the agent will be paid upon the closing of a transaction. The HUD1 or Settlement Statement will show the amount of compensation the Listing and the Selling companies are receiving and from that amount, they will pay their respective agents is per their agreement. As there is no such thing as a set commission fee and all commissions are negotiable between the seller and the listing agency, the percentage or flat fee the selling agency will receive is published by the Multiple Listing Service and these figures vary greatly as some sellers are more generous that others and some companies are more generous with their agents than others may be..

Ardell, you said "...Can a seller pay 15% commission, without the buyer's lender refusing to finance that? Max I have seen a buyer's lender allow in terms of commission is 7%. Or does the buyer's lender never see the commission (or care about it either0, these days?"

Going back to the accounting reality: the commission is on the seller side of the HUD and while this is a pretty radical example, I can't see why the lender would care. It's not a seller concession...

Jack,

If you don't have a Buyer Agency Agreement with your agent, ask him to draft one for you. It should spell out exactly what he will be paid.

The suggested amount may be 3% of the sales price. If a Seller agrees to pay more, like 4%, you would get the extra amount. If it's LESS than 3%, then you would be expected to make up the difference.

Some agents choose not to share the amount of the commission paid, at least at first showing, because they would rather have the Buyer concentrate on the house itself, if you like or dislike it, irregardless of the commission, as that amount may be irrelevant if the house is the home of your dreams.

- Anyone who is still saying "the seller pays the commission" in this day and age, is simply missing the point and refusing to "get" it.

Tell us, who pays the commission in NY NY? What's the "revolution" there?

Well, as a general rule the amount that a buyer can use for seller concessions regardless of what they are used to pay is either 6% or 3% depending upon the loan type and down payment.

For example, FHA loans allow 6% of the sales price and conventional loans allow 3% up to 20% down and 6% after 20% down. Typically these percentages are used to pay the buyer’s closing costs.

I have never heard of the buyer financing real estate commission with these percentages. However that does not mean that that is not possible.

Mike Carpenter
Mike the Money Man

Mike, glad you popped in. I was just having a convo on twitter regarding the commission being financed by the buyer. Some agents are disputing that. I was surprised as I thought it was widely known that the buyer's lender had a cap on who much they would permit the buyer to finance in terms of commission. Used to be a total of 7%.

Has that changed? Can a seller pay 15% commission, without the buyer's lender refusing to finance that? Max I have seen a buyer's lender allow in terms of commission is 7%. Or does the buyer's lender never see the commission (or care about it either0, these days?

I am not a realtor and I might be stepping outside my area of expertise but, the buyer’s agent should be very upfront about the commission. Typically the seller agent will negotiate a 6% commission. This 6% commission is usually spit between the seller’s agent and the buyer’s agent.

In most transactions the buyer’s and the seller’s agent both get 3% of the sales price. In some cases the seller will negotiate a smaller commission especially if the seller’s agent will sell their clients house and act as the buyer’s agent on the sale of the client’s new house.

Your agent is correct in part that the commission will vary depending upon the circumstances but in most cases it is 3% of the sales price of the house you buy.

This is quite widely known so I do not see a reason that your agent should keep the information from you. If your agent is not acting in your best interest he MAY try to steer you towards homes that pay a full commission but, I have not see this as a standard industry practice.

Hope this helps

Mike Carpenter
Mike the Money Man

Anyone who is still saying "the seller pays the commission" in this day and age, is simply missing the point and refusing to "get" it. This is not a "local" issue, this is a buyer revolution to some extent...and long overdue. A line is drawn in the sand, guys. "Are you in the past or in the present?" is the only question being asked and answered here.

~~~~~~~~~~~~~~~~

Alrighty then, Ardell. My seller bought their house for 600,000 2 years ago. They are being transferred and are selling. Their house is now listed at 479,000. Who is paying the 6% commission?

Anyone who is still saying "the seller pays the commission" in this day and age, is simply missing the point and refusing to "get" it. This is not a "local" issue, this is a buyer revolution to some extent...and long overdue. A line is drawn in the sand, guys. "Are you in the past or in the present?" is the only question being asked and answered here.

There is a missing step. When Buyer Agency first came to be, buyer agents submitted a form that said:

"I refuse and negate the mls offering, and replace it with a Buyer Agent fee in the same amount, as a condition to this offer. This Buyer Agent fee is to be shown on the seller side as a convenience to the transaction." There was also a different Purchase and Sale Agreement to be used that favored the buyer vs. the seller.

This method immediately became problematic (talking early 90s here) because buyers refused to present an offer on the seller favored form, and sellers refused to accept offers on the buyer favored form. Consequently, our industry went back to the drawing board and drafted a new purchase and sale agreement that tried to strike a balance between seller and buyer concerns. The defaults in most contracts were changed to favor the buyer vs. the seller at the end of the day, as did inspection clauses.

The commission issue was largely left as it was, with the understanding that the buyer commission was being included "as a convenience to the transaction" and was no longer money paid by the seller to "procure" a buyer. What we forget causes life to regurgitate old battles already won.

If you think the seller pays the buyer agent fee (vs only their own agent's fee) then you also think you are paid to "procure a buyer FOR the seller". ..and that simply cannot be.

JR. I agree that " Just because the buyer is a client of SOMEONE does not have any bearing on the commission the seller pays their own listing agent."
But to preface that with, " There Is only one CLIENT regards commission and that client is the seller. The seller is the CLIENT of the listing agent. The listing agent and the seller decide what part of the commission THEY negotiate between THEM will be paid out to the agent who SELLS the house.", seems incongruous.

I would say just because the seller is a client of SOMEONE does not have any bearing on the commission negotiated between the BUYER and THEIR agent and does not impact the buyer's right to negotiate with the seller to pay that commission.

Paul Howard

Well I think we have discussed this topic long enough. This subject also varies by state law and mls rules sometimes. It was interesting, but I have more sellers to help get their homes sold than continue on with this debate.
If Jack wants to know how much his agent is being paid, Jack should ask him/her. If that agent won't answer and it's important to Jack he should find one who will.
Jack, why is it being shady when there are soooooo many variables that have been thoroughly explained?
Is your bigger concern that you want to negotiate the your buyer's agent commission? Of course the seller usually pays the commission anyway. But there we go with that word "usually" again.
I am always happy to help answer these questions. But there DOES come a point where it means I am neglecting my many owners who need to get their homes sold.
Best of luck to all who have participated:-)

JR said "There Is only one CLIENT regards commission and that client is the seller."

Interesting position but it flies in the face of the fact that I (and many others) negotiate my commission with my buyer clients all the time and what we negotiate is what I get. I like it when I know what I'm going to get when I start working for a buyer and that it is not dependent on whoever the seller and their agent turn out to be.

~~~~~~~~
I hope you read the rest of my answer.

Dugald,

I think we are agreeing, we're just saying the same thing a bit differently. I'd like to meet you sometime. Let me know if you are going to the Seattle or Bellevue ReBarCamps in Sept and Oct.

JR said "There Is only one CLIENT regards commission and that client is the seller."

Interesting position but it flies in the face of the fact that I (and many others) negotiate my commission with my buyer clients all the time and what we negotiate is what I get. I like it when I know what I'm going to get when I start working for a buyer and that it is not dependent on whoever the seller and their agent turn out to be.

Paul Howard, Broker
NJHomeBuyer.com Realty

M ark; First, let's be clear that the buyer is the one who is really "paying" their buyer's agent. I just love all the ads that say something to the effect that there is no cost to the buyer because the commissions are paid by the seller.

JR: That’s just spin. It’s spin to say “it’s free to you, the seller is paying” just like it’s spin to say “you’re the buyer, you bring a big bag of money to the closing table—the seller just brings the keys and the deed!”


Mark: WHERE DOES ONE THINK THE SELLER GETS THE MONEY TO PAY THE COMMISSION? From the buyer of course. It's built into the price.

JR: What if the seller is selling at a loss or it’s a short sale? Where does the extra money come from? The seller is paying, pure and simple.

With reference to agents comparing their services to that of lawyers I wonder what their clients would think if the 2 opposing attorneys determined between themselves what their client would pay. Or, a better analogy - what if the defendant and their attorney decided in advance how much to pay the plaintiff's attorney?

It might not look too good to the plaintiff. :) That is our current (and past) real estate industry.
~~~~~~~~~~~~

Your answer makes no sense. There Is only one CLIENT regards commission and that client is the seller. The seller is the CLIENT of the listing agent. The listing agent and the seller decide what part of the commission THEY negotiate between THEM will be paid out to the agent who SELLS the house. The buyer may be a client of the selling agent, in that case the buyer and the selling agent can negotiate the minimum commission the selling agent gets, and the buyer is a client of his own attorney, and presumably that party and the attorney will have their own agreement (although I’ve never had an attorney negotiate their paycheck when it comes to a closing). Just because the buyer is a client of SOMEONE does not have any bearing on the commission the seller pays their own listing agent. Which is why your answer makes no sense.

That fact of the matter is, agent commissions are more often than not very much in play when buyers and sellers are negotiating price.
~~~~~~~~~~~~~

I’ve never had my commission come up during negotiations, so it obviously didn't play a very big part. Actually, commission usually plays a cameo appearance in my listing presentation, which is when I negotiate it with my client. After that, it isn’t heard from again. ☺

Stephen, this statement: "That fact of the matter is, agent commissions are more often than not very much in play when buyers and sellers are negotiating price." may not be the case at least so far as I am aware. Of course, there are some agents that will cut their commission to make a deal work. To my knowledge it is not common, though, except in the case of short sales but even then I would not do it. I'll negotiate my commission with my client at the beginning of the relationship. Once it is decided I have never yet changed it.

The average agent makes less than $45,000 per year. Some will cut a commission because they can't afford to lose a deal. What else will they do not to lose a deal? Buyers are represented better when they have an agent that is contracturally obligated to perform and one that knows what they will be paid for doing so.

Paul Howard, Broker http://www.NJHomeBuyer.com Realty

Just in case it's not obvious.....

I have a stalker. Never met the guy. ...never done business with him/her. Somehow don't think I will...

Hi Steven!

Paul,

The disclosures outlined in the press release are already required in WA State...

With reference to agents comparing their services to that of lawyers I wonder what their clients would think if the 2 opposing attorneys determined between themselves what their client would pay. Or, a better analogy - what if the defendant and their attorney decided in advance how much to pay the plaintiff's attorney?

It might not look too good to the plaintiff. :) That is our current (and past) real estate industry.

Paul Howard, Broker http://www.NJHomeBuyer.com Realty

Jack,
Speaking of transparency you might be interested in this. The organization that put it out only works for buyers. http://www.reuters.com/article/pressRelease/idUS106593+19-Ju…

Many agents continue to believe that a buyer does not have a complete right to know not only what commission "their" agent will receive but does not have a right to determine that commission via a buyer's agent agreement.

Some (agents) appear to believe that MLS rules can impact the terms of a buyers offer. The buyer owns the offer - not the agent and not the MLS so that is not true. Also, the terms of the sales contract for the property are not controlled by MLS rules - whether or not the agents the seller and/or buyer are using are members of an MLS or not. Neither the agents nor the MLS are a party to that contract.

If the buyer has conditioned their offer on the seller's agreement to pay their agent and the seller has accepted that condition that had better show up in a contract between the buyer and the seller else the buyer may end up paying it to their agent out of their own pocket.

The best way for a buyer to protect themselves is to insist on a written buyer agent agreement specifying the terms of the agreement including the ending date and the commission amount or rate. Given the lack of knowledge regarding contract law most agents (and consumers) have it would be wise to have that contract reviewed by a real estate attorney too.

Paul Howard, Broker http://www.NJHomeBuyer.com Realty

Jack, while there were more than I was expecting, I don't think the majority of responses were contrary to your point of view. I'm glad of that.

As a lot of folks have said below: if the agent you are working with does not answer the question(s) to your satisfaction, then find another agent who will.

...but yes, even if you do know the commission, you should take that out of the equation in your search. It was set before the ink was dry on the listing contract - the one between the seller and the listing broker. To paraphrase Mark L below: "it's already in the listing price."

If you think your agent is steering you to higher commission properties, then find another agent who will steer you right.

If you don't think it's possible to get objective advice, then you may be someone who's more comfortable buying without representation. That may work, too. ...but if you do, you should know that the listing agent has no requirement to rebate you anything from the commissions and it may not be in his client's interests to tell you what those commissions are. He/she doesn't work for you at all.

Mark L: it's NOT clear. I think that's why I'm post #71. :) See below for some "clarification" that may not even help!

Ardell, hopefully it's more than a penny considering gas prices! :)

You say that you prefer to think of it as the buyer paying ("I'm the one with the money!"). A seller prefers to think of it as the seller paying ("how much less am I taking away from the closing table?") So suggesting that giving the buyer dignity by describing it that way may take away the same from the seller. That's why I prefer to explain it the way I do - the *transaction* is paying the costs and both parties are a part of that. By the way, don't forget other seller-side costs such as prorated taxes, excise tax, escrow etc.

You could even make an argument that it's actually the buyer's bank that's paying the commission.

Some thoughts (and these are true for a "regular" WA State transaction):

...contractually speaking, the listing office pays the buyer's agent from the commission that they charged the seller. It's actually the LISTING AGENT that pays the buyer's agent.

...it's not shown on the HUD for "convenience" sake. It's shown there because, well, see above. The HUD doesn't lie. (OK, so let's not get off on that tangent - ha ha)

...in an investment scenario, the seller gets to itemize that cost in his taxes/accounting. The buyer does not and since the IRS is the highest and most revered entity on the planet, I'd say that was incontravertible evidence that the seller paid the commissions...

...if the explanation as to who pays the commission were to hold true in all cases, how would you describe a sale of property where the seller has to bring money to the table? It happens when someone does not qualify for a short sale. Perhaps they brought an amount greater than the costs of that sale... Who paid the commission?

Mark L: you say it's all built into the price. Isn't that another way of saying "the transaction pays"...?

****
Look, I'm having a little fun here. It doesn't matter *where* it comes from. it's all semantics/marketing. If you want to call it one way, then that's fine. I just prefer otherwise.

So let me get this straight. It is OK for the seller to know the fees paid to the real estate agents but it remains a secret to the buyer because "I should take the commission out of the equation", "if I get good deal, commision shouldn't matter", or I should "just buy a home that I love and not worry about it"? Clearly real estate agenge compensation is not "insignificant" or "unimportant" to the seller, so why am I any different as a buyer? Why can't I get a combo of a house that I love, great agent negotiaton, a great price, plus transparency from my broker? Is that too much to ask?

To those of you who feel the need to outline your costs, I would remind you that consumers, including this one, don't care that you have expenses. Last time I checked, ALL businesses have expenses,. Any sane business person will work those expenses into their fee structure. Many realtors want to liken themselves to other service professionals like lawyers or investment advisors. Correct me if I am wrong, but those professions do not have a problem clearly outlining their fees.

Kudos to those of you on this string who see it from the consumer's point of view. Though I am surprised and disappointed at the secretive attitudes of most replies here. Nothing in my question implies that I am looking for justification of commission rates, and some professionals may be worth the extra cost. I'm simply looking for some transparency in the matter.

Ardell,

The commission is not negotiable between the buyer and seller directly, the buyer is not a party to the fee agreement, that is contract law and neither are party to the MLS rules and are not bound by them in any way. There is variations in how things are worded but the fee is as negotiable as the price the seller offers, but between the parties of the fee agreement, the seller and the listing agent. The listing agent can always reduce their fee to put a deal together and he can always ask the buyers agent to do the same and the buyers agent can always refuse but it can be done. The parties to a contract can always agree to change the contract. NAR prohibits commission language in the contract because contract law dictate that the only the parties to a contract can change the contract, the buyer is not a party to the fee agreement between the seller and the listing agent but they would be with their agent and the buyer's fee agreement. which can be fixed or not and closing costs can be asked for in an offer as closing costs. Your MLS may impose fines for including commission language in an offer but those would be minor compared to NAR's sanctions for a code violation. It is true our real estate laws vary to some extent but they are similar enough that we can easily have a dual license in both states and many of our RE laws are modeled from each other's RE laws. WA OR laws may further define and MLS may help enforce and govern to some extent but it is still simple federal contract law the same in every state.

Ron rogers, CRS, GRI, ABR

Ron,

It's not a matter of contract law, as the agents are not party to the contract between the buyer and seller and are bound by the mls rules governing relationships between Brokers. Our mls prohibits the manner you suggest and prohibits commission language in the purchase and sale agreement on a property listed via the mls by mls members.

Perhaps if an agent were not a member of the mls, your thinking would apply. The only instance I can think of is when the buyer hires an attorney to write the offer vs and mls member agent.

Your statement "it has nothing to do with mls rules" is simply not true where the questioner, Jack Gates is, and where we are. I cannot post mls forms or rules in a public forum or give them to you, as they are proprietary to our mls and our rules prohibit my doing so.

You'll just have to take the word of the Seattle people here that what you may or may not be able to do in Oregon, is not the same here.

Ron,

You said "CAN (emphasis added) be a buyer's agent". I'm not familiar with Oregon, but in WA the agent does not have the option, the buyer does. We represent buyers at all times by law (unless we are the one and only specific agent of the seller). To NOT represent any buyer in WA, you need the buyer's written consent for a reduced level of care.

I have worked in WA, PA, FL. CA and NJ, so whether or not I choose to use a buyer agency agreement has nothing to do with the state I am in. I do one when there is a clear and apparent reason for a buyer to need one. I also often offer one if the buyer should have one, but usually my clients and I prefer a relationship based on mutual trust. Buying a house is a big decision full of lots of small ones that can't be defined at the onset in writing. What I do for each client is not the same as it depends on the client's strengths and weaknesses. It is my job to be strongest where they are weakest.

I find most agents want a contract for reasons other than the buyer's benefit or to list all the things they will do for their client. Many want a contract to be sure the buyer does not buy a home without them. I think a relationship based on mutual trust is the only way to do business, whether or not that mutually trusting relationship is in writing.

I've been in the business over 19 years. Needing my clients to sign a written agreement has not been necessary for me, and a written agreement without a meeting of the minds and mutual trust is worthless.

A very wise Broker once told me: At the point when you and a buyer client are ready to sign a written agreement...that is also the point where you don't likely need one. Getting TO the point where you are both ready to sign one is the important part.

Ardell,

Wa may be one of the only states that an agent can be a buyer's agent without a contract but Oregon is another one then, but just to clarify it still does not replace a buyer's contract. They are not used in my area very much either but that does not mean that you can't start using them Paul. the buyer's agency sets the minimum, and/ or the maximum fee the buyer agent will be paid and the offer can ask for the seller to contribute to buyer closing costs there by paying the agreed increased commission or reduced commission if that is the case in the buyer contract. You are correct in that there is no way for a buyer to insist on a commission adjustment in a buyer's agent offering in a buyer's offer to the seller directly and I believe that is true with most MLS's because it is common contract law and the buyer is not a party to setting that fee contract nor is the buyer's agent. It really has nothing to do with MLS rules. But when the offer comes in low and the seller says I will accept the offer on the condition that the listing agent reduces their fee and the listing agent goes to the buyer's agent to share in that fee reduction then it is not set, it is not a minimum, it is as negotiable as anything else in the transaction. The buyer's agent can say no to the reduction but may loose the sale and the listing agent can say no to the reduction and may loose the sale. Upon the listing agent objecting to the seller's terms the seller can then still consider if they want to accept the offer and pay the full agreed upon fee or reject it. In this way it is initially just an offer as Paul said from the seller at the time the property is listed just as much as the price set on the property is an offer to a prospective buyer.
I do agree that who pays the fee is a matter of perspective. I believe Jack said earlier that believe he was the one paying the fee because he was bringing the money to the table. Well The seller believes they are paying the fee because the check for the proceeds after the deal is closed is reduced. The fee is paid as much by the seller as it is covered by the buyer.
I would also like to clarify that an agent is in no way obligated to show every property that meets a buyer criteria regardless of the fee offered by the seller. We do not have to show FSBO's and we don't have to show property that is below the fee that an agent expects to get from a sale. What we do have to do is disclose that we won't be showing property that does not meet that fee expectation there by giving the buyer the opportunity to look at those properties with someone else if they choose or the option of paying the difference. You could, in concept at least do this verbally but there is really little to no enforcement so this is why a buyer's contract is the best way to go. It lays it all out before so everyone knows the expectations. The buyer knows that they may need to kick in a little if the fee is low and can consider this when they make the offer, if they make the offer. I keep hearing everyone say we have to show every property and we do not.

Ron Rogers, CRS, GRI, ABR

Dugold,

If it was a "penny" it wouldn't be worth talking about :) Frankly, from my perspective it's not about "the money" per se, as much as giving buyer's the dignity of the discussion on their side of the equation.

When an agent thinks they are paid by the seller and outright "entitled" to an amount promised by the seller, they don't treat buyers as well, and think their client (the buyer) isn't paying them. It's not a good way to look at it.

If every agent for the seller understands their portion of the total comes from the seller, and every agent for the buyer understands their portion is paid by the money the buyer brings to the table, it keeps everybody honest as to their allegiance to their own client. It's just a change in mindset really, and not so much about money.

Every buyer then has a "discussion" regarding the buyer agent fee when hiring a buyer agent. It's not about how much or how little...it's about the right to have "the talk". I find agents who believe their client is paying them, see everything in a better light as to their client's rights throughout the entire process. If the agent thinks the buyer is getting representation "for free", well, I think we all agree that is not the best case scenario.

Agents not wanting to have a discussion with a buyer the same as they do with a seller, is kind of like saying "you're not my client; just hurry up and buy something and what I get paid is none of your business." That stance is inappropriate, and no buyer should hire an agent who refuses to acknowledge that each agent is paid by their client within the transaction.

The buyer pays their agent via the purchase price, and it is shown on the seller side "as a convenience to the transaction" so it can be easily financed, and so the asking price can be set accommodating the fee, before the buyer is a known entity.

Paul,

WA is one of the only states that has buyer "representation" as the default in the agency laws, with no formal contract needed for buyer's to achieve the higher "client" status vs. "customer" status.

Also, our mls does not permit an adjustment of the buyer agent offering in the buyer's offer. Mls clarified that rule with an upgrade on July 15th...have to check that again. But pretty sure there was a strong warning not to think you could change the SOC as offered in the mls, via the offer from buyer to seller. It was very clear that commission offered was not negotiable with seller, via an adjustment in the purchase and sale agreement.

Our mls fines here are pretty steep. Usually $5,000 per violation. So rule breaking is not common in these parts.

P.S. I started real estate in Cherry Hill in 1990. Lived at 82 Partridge Lane and worked for Coldwell Banker on Rte 70 in the old Connie Mafucci building. Is Eileen Friedland still around? I think she went to Fox and Lazo (changed their name some time back) when our office went belly up in the early 90s.

OK, Paul, you're dealing with semantics...

Does the seller dictate your income? no. They do, however, dictate the minimum selling office commission for a particular transaction. That is also the "typical" income. We have buyer agency agreements that allow for a buyer to make up the difference between a negotiated minimum and that offered by the seller. As far as I can tell, they are used rarely here despite being a good idea.

NAR does not govern the structure of NWMLS commissions - it is dealt with by the NWMLS. While I am bound by the COE in terms of my behaviour, I am dealing on a regular basis with non-Realtors and the MLS rules mostly run the show. Disputes can be handled through the MLS or the Realtors or both - depending upon the kind of dispute, of course. There is a terminology difference here as we don't have that listing-input level relationship with NAR.

What I (and others) read into your statements were assertions that there was no SOC where you are and that it was negotiated separately for each transaction and that you were on your own. Re-reading your posts, that is still what I get from it. No matter. Problem solved.

In Connecticut we sign a Buyer's Agreement which we agree to work for the buyer, not the seller...it is a fiduciary relationship and if for some reason we don't feel comfortable with each other we can cancel the agreement altho we do hold it accountable for those properties we had introduced you to. Then you can go on to work with someone else.

If you think he might be only showing you those listings that pay a higher commission, then it sounds like you don't trust him....and that is not good for either you or him.

Remember the buyer agent side of the commission is only the beginning....the brokerage gets that and then after deducting office fees, insurance (if still owed), and any referral fees, the agent gets paid...

The agent never gets paid for the use of his/her car, time, memberships that allow him or her to keep abreast of the market.....but that is no reason for an agent to steer you towards properties that pay a higher commission!!

Good luck! Remembe you want a fiduciary relationship with an agent.

Paul,

What you are saying is completely correct and is just simple contract law. A fee set before the sale is still negotiable between the principals of that fee agreement and that is true in every state. MLS rules cannot guaranty a fee because they are not a party to the agreement. If the seller receives an offer less than they are asking then they can choose to negotiate a reduced fee with the listing agent. The listing agent can take that total hit or negotiate with the buyers agent to participate. In this way it is as much an offer of compensation to both the selling agent and the listing agent as the amount the seller sets on the property. The buyer is never a party to these negotiations and these negotiation can never be written into a buyer's offer.
A buyer can negotiate a fee with their agent and it can be a set percentage, a set amount or it can vary. If a buyer really wants to put their agent to work for them they might consider a bonus structure for their agent. Example a for every dollar off the seller's asking price the buyer's agent negotiates they gets a percentage. So the better negotiator that agent is the more they will make and the better the deal will be for the buyer.

Jack, A buyer contract can be as open as you and the agent want it to be when it comes to what you need to set. If you want your agent working for you hire them to work for you. Take the control of what they are being compensated out of the seller's hands and make it worth while for your agent to work harder for you than the average agent that is just falling in line with the way things are. You and your Buyer's agent should be a team and before you go into contract with any agent you should be able to trust them and be able to consider any advise they give you...not take it but at least consider it. If you feel your agent is not giving you good advise then you don't want them representing you and you don't want to be obligated in a contract with them.

Ron Rogers, CRS, GRI, ABR

Dugald,

This statement: "If it's listed, then the listed commission is guaranteed to the buyer agent (subject to the MLS rules and exceptions). There is no need for subsequent (or any) discussions or paperwork on the matter between the listing and selling agents. "

I don't disagree with this statement. What I disagree with is the implication that the selling office is bound to accept whatever it is that the seller and their agent decide on as payment in full. If that were true there would be no point in the buyer and their agent negotiating but buyer agent's commission.

If you have some legal document from your board that says otherwise I would be very interested in reading it. I don't think it matters that the MLS may be owned by it's members.

Do you disagree with my assertion that a buyer can select a company to represent them and that they can negotiate a fee for the services to be performed by that company AND that they can condition a purchase offer on the seller's agreement to pay that fee on their behalf? It seems to me a matter of contract law. If you do disagree, do you have any basis for the disagreement aside from 'tradition'?

While I have heard all the arguments before, I have never seen any legal document to back them up. If it exists I would like to see it. I might be wrong and if that can be shown I will say so.

It would be significant to tell home buyers across the country that they do not have the right to select a company to represent them and to negotiate the compensation that company will receive.

Paul Howard, Broker
NJHomeBuyer.com Realty

Ardell,

You say below, "the seller needs to "set aside" within that price, an amount sufficient for the buyer to hire representation, and pay for that representation, as part of the transaction"

I prefer to explain the "who pays commission" as the "transaction" paying it. For every penny the buyer brings to the table, there is a penny less that the seller takes from the table. It's the same penny. There is an effect to both parties.

Saying "the guy with the money" (aka buyer) pays the commission (in my opinion) doesn't tell the whole story.

Paul,

Again, I don't presume to know how your business is structured and how the local listing system works. Please do us the courtesy of the same.

In this area, it just doesn't work the way you are assuming. Perhaps Ardell is right in that the distinction is that we do not have a Realtor-run MLS. The MLS is owned by the brokerage members - not all of whom are Realtor affiliates.

If it's listed, then the listed commission is guaranteed to the buyer agent (subject to the MLS rules and exceptions). There is no need for subsequent (or any) discussions or paperwork on the matter between the listing and selling agents.

The selling office commission is on the seller-side of the HUD-1. It is not a buyer cost (unless there is a separate buyer agreement with the buyer's agent.)

Ardell,
I'm not sure which part you are saying is not true. Are you saying that in your area most selling agents don't think the commission they will receive is that which is "offered" in the MLS and that it is their obligation to accept that as payment in full?

Do agents there work with buyers without a contract?

Paul Howard

Paul,

That is simply not true here in the Seattle Area. Our MLS is not owned by the Board of Realtors, so the COE is not the governing body. Local mls rules apply. Because the MLS is not owned by the Board of Realtors, agents do not need to be members of the Board to access the mls in our area. Agent and "Realtor" are not synonomous here.

When a seller sits down with their seller's agent (listing agent) they determine a buyer agent "offering" for a few reasons:

1) The seller wants as many agents as possible to show the home
2) The buyer is unknown, so the buyer agent fee is also an unknown on that day
3) The buyer will likely be financing the buyer agent fee in the sale price

Because the seller sets the asking price, the seller needs to "set aside" within that price, an amount sufficient for the buyer to hire representation, and pay for that representation, as part of the transaction. The seller does not tell the buyer and buyer's agent what that fee "should be". The seller simply sets in motion the means by which a buyer and his agent can fund their agreed upon commission.

Jack is correct that the seller offering "a bonus" for a buyer agent to "direct" a buyer to his home (in order to make more money), is an outdated and inappropriate offer. It is a "leftover" from the days when all agents represented the seller. Though the seller is free to use any means to entice a buyer, doing so by means of a bonus the buyer is not privy to, only made sense when ALL agents represented the seller back 20 or so years ago.

The mls offering is not what the agent for the buyer is "to be paid". It is an amount "set aside" to be discussed and decided between the buyer and the buyer's agent. Think of it as a "retainer".

An attorney may ask you to deposit $5,000 with him as a retainer. But if the final agreed upon price between the attorney and client is $200 an hour, and at the end the total monies needed to pay for the service is $4,000, then the attorney does not keep the remaining $1,000 from the retainer. Same with a buyer agent fee. If the seller offers 3%, but the commission understanding between the buyer and his agent is 2%, then the fact that 3% was "set aside" by the seller, does not change the agreement between the buyer and his agent.

While everyone is correct regarding "the rules we made for ourselves", at some point we have to understand that our clients, and in this case the client is the buyer and not the seller, are no longer going to sit still and watch us make our own rules and determine how much they will pay us, without their input.

The rules we made for ourselves when we ALL represented sellers of homes, and never buyers of homes...well, really. Does it make sense to anyone that we didn't sit down and change our rules back 15 to 20 years ago when buyer's attained representation? I don't think so, and neither do most buyers of homes.

Web Reference:

Dugald, You are correct that the "offered" commission is not to be later negotiated. However, neither does it need to be accepted as complete payment by the selling office. The buyer, being bound by a buyer agent contract to a specific rate of payment, is quite free to condition the purchase offer on the seller paying in full (or even in part) the amount the buyer and their representative agreed to.

In the end there are 3 contracts. (at least)

Listing office and seller.
Selling office and buyer.
Seller and buyer.

The 'offer' of compensation in the MLS is just that - an offer. The selling office may already have a contract for their payment with the buyer. The buyer could agree to pay it or they may negotiate to have the seller pay it.

This position is consistent with the code of ethics and the standards of practice and supporting arbitration rulings of the National Association of Realtors.

This position is not region dependent. It applies nationally.

This further supports my opinion that the "offer" in the MLS is price fixing because so many agents believe that the seller and their agent can actually dictate via that offer the income of the selling office.

Paul Howard, Broker http://www.NJHomeBuyer.com Realty

In re-reading my post, I said "guaranteed" with regards to regional commission trends...

What I meant to convey is that, while there are trends with regards to commission rates (that can vary by region) you can't "expect" a specific commission rate from house-to-house. It's completely a decision made by the seller and listing agent in their negotiation of the listing contract.

Paul, your point about entering into a buyer agency agreement is well-found and applies here as well.

However, gauging from your post, the way that commissions are structured here obviously works differently in your area of expertise.

OK, to clarify and to get technical (sorry non-broker folks!). My broker is a a member of the Northwest MLS that is the only MLS around the area that Jack's ID says he's in. This MLS covers pretty much all of western WA and large parts of the rest of the state and the overwhelming majority of brokers in the area & who are in the business of buy/sell of residential properties are members - close to 100%.

As a member of NWMLS, brokers sign cooperating agreements that, among other things, sets a structure regarding commission payments to other cooperating brokers. Because this structure is set up, there is no further paperwork regarding the amount of commission or how it is to be paid between cooperating buyer's agents and listing agents in a "regular" transaction. As a buyer agent, you can expect to receive the commission offered at the time of the purchase offer through an NWMLS listing in a closed transaction. There are exceptions, but these are documented in the MLS rules.

In a nutshell: an arm's length buyer's agent (buyer's agent's broker) will receive the offered commission. It's not an "offer" in the context of something to be later negotiated. Yes, commissions can be brought into a negotiation and that is, perhaps, one of the underlying aspects of Jack's question.

The Selling Office Commission is set by the seller and it is detailed in the listing agreement that the seller has with the listing agent. That agreement spells out the commission that will be given to each of the listing and selling offices. period.

It's not price-fixing as the amount changes from seller-to-seller and (given an arm's length transaction) the buyer's broker had no input into the commission. You will find that there are "commonly found" comission rates, but even those are regional and are not guaranteed.

Of course, if the transaction is with a FSBO or you are with a brokerage that is not a member of the MLS, then all bets are off. However, that wasn't the premise of the discussion.

That was waaaay too technical an explanation for this kind of blog, but there you have it.

:)

Donald, I did not misstate, misinterpret or misunderstand. I meant exactly what I said and it applies to any state in the country. And, it is in accordance with the NAR COE and arbitration precedents.

The agreement between the listing company and a seller is between them alone. They decide on an "OFFER" amount for compensation to a selling company. That "OFFER" is place through the MLS. It is only an offer - to be accepted or not by a cooperating broker. Any statement to a seller by a listing company that the selling agent MUST accept that amount is false. (By the way, if that were more than an offer it would be price fixing and the MLS would be a party to it - that is why it is an OFFER.) Personally, I think the MLS should be banned from posting offers of compensation in the MLS because so many agent THINK they are binding that the effect is nearly the same.

The agreement between the selling company and the buyer is between them alone. It does not matter what house is involved or what the listing agent and seller decided to OFFER. The buyer is free to make their purchase offer contingent on the SELLER paying that commission. If the buyer agent commission is more than the amount offered in the MLS the seller would pay a little more if they accept the buyer's purchase offer. If the buyer agent commission is less than the amount offered in the MLS the seller would pay a little less if they accept the buyer's purchase offer. This is completely independent of any agreements the seller and the company they have enlisted to represent them have come up with. Just as the selling company's agent is not permitted to interfere with the agreement between the seller and the listing company, the listing company may not interfere with the agreement between the buyer and the selling company.

ONLY when the buyer fails to enter into an agreement specifying the commission is the agent in the position of playing pot luck with the commission. And only then is the buyer at risk of poor service because of failure to enter into a contract. You get what you pay for. The code of ethics section that David Chamberlain cited earlier is relevant here.

It is well known that when seller's and their agents "OFFER" a low commission to cooperating broker the house stays on the market much longer because most agents don't enter into contracts with the buyers they represent and so have no way to protect their commission. Despite any obligation they may have to show all homes listed they are human and many will look for a way to protect their income even if it means not showing homes that will not result in sufficient income, The 'average' agent makes less than $45000 per year. There is not a lot of margin for working for buyers at a discount. The volume just is not there.

Both the buyer and the selling company will be well served by entering into a binding contract.

Paul Howard, Broker http://www.NJHomeBuyer.com Realty
811 Church Rd Ste 111
Cherry Hill NJ 08002
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Jack,

I would suggest that there should be a certain amount of trust. I do think that checking up on things for yourself and being educated is good as a buyer or seller. There is one way to solve the problem, hire him for yourself as a buyer's agent to represent you and your interests in doing so you pay a default fee that if the listing is lower then you cover the difference. The amount you set is whatever you negotiate with that agent. I will tell you if negotiation go mostly your way then you might wonder how they will go when your agent is negotiating your offer to the listing agent and seller. It is true that if a listing does not meet the agent's fee standards they should be disclosing that to you but many don't and that is why buyer contracts are a good thing because it lays out what you get, What they after for service, and what they expect from you (the fee, loyalty, etc.) If it is higher than the fee you agree on then it should be disclosed to you and it should state that in the buyer contract. If the house meets your needs and is priced well then it should not really matter, and if your agent is doing a good job you should be happy to pay it because if they are the better negotiator they will more than save you any rebate you would get from an agent who is desperate to hold onto your business and is just looking for a sale. A good attorney costs more, a good restaurant costs more and both are always busy. If you are having a problem trusting your agent find a different one until you find an agent that you can trust. I would recommend a Certified Residential Specialist (CRS). They are typically the best trained and educated to better represent your interests. If you need a good recommendation I personally know several great agents in the Seattle area. In the interest of full disclosure here they would pay me a fee to recommend them but I would get the same if I recommended a bad agent, but I only get the fee if you buy something so my interest is in finding a good agent that can help you get the best deal possible. I have only had one bad referral with negative reviews in over 8 years of referring agents all over the country. :Let me know if I can help.
Good Luck,

Ron rogers, CRS, GRI, ABR